Russia FX Beat - February 13, 2018

> Today's focus. Weak dollar and IEA oil report to lift oil prices.
> Global trigger: Dollar loses steam. The S&P 500 rose 1.4% yesterday - the second consecutive day of healthy gains. The more upbeat mood has pushed the dollar weaker across the board, EUR/USD returning above 1.23 for the first time in nearly a week.
Today is quiet for data, with UK CPI (12:30 Moscow time) and US NFIB business sentiment (14:00) the only notable releases. Of more interest might be comments by Fed voter Loretta Mester at 16:00, who is at the hawkish end of the spectrum. In reality, however, investors will likely bide their time until tomorrow when US retail sales and CPI data are due.
Elsewhere, attention is on a $4.4 trln budget released by the White House yesterday. This is just the starting point for talks and will not pass Congress in its current form. Yet it is heavy on spending (taking the deficit to a peak of 5.4% of GDP) at a time when the US economy is strong. Even a watered-down version of this would likely to heap further pressure on USTs.
> Bottom line. If US stocks can gain further, EUR/USD has a chance to push toward 1.2350.
> Regional trigger: IEA oil report eyed. Yesterday, the ruble gained 1%, playing catch-up with its EM peers, which firmed about 0.5% on average. The main driver was the global risk-on mood. Locally, it was a quiet day and turnover returned back to normal levels.
This morning, there is some pickup in risk aversion, as futures on the S&P 500 lost 0.4%. So, a continuation of ruble appreciation is questionable. However, some support may come from oil. At 12:00 Moscow time, IEA will release an update of its forecast for oil demand this year. The previous one was very bearish, as it forecast only a 1.29 mbpd increase this year. This was well below other forecasts, such as OPEC's, which expects 1.6 mbpd. If the IEA figure turns out to be less bearish, oil may soar, which would support the ruble.
Yesterday, the CBR published statistics on foreign holdings of OFZs. Foreigners bought R58 bln in net terms in December and their share rose to 33.1%. It seems that they continued buying in January and that their share again increased. However, demand from foreigners might have decreased significantly in February on the back of the ongoing correction in global markets.
> Bottom line. USD/RUB will stay around 57.8, unless oil rebounds sharply.